Though often overlooked, the trucking industry is vitally important to the health of the US economy. Think about it: without truck drivers delivering goods, interstate commerce would grind to a screeching, tire-burning halt.
Unique Challenges
Despite the importance of trucking companies, the way the system is structured often leaves them in the shaky financial position. Truck companies submit invoices for services rendered, and then often wait 30-90 days for payment on the accounts receivables.
For a bigger company with large cash reserves, waiting to be paid would not be a controversy. But for small to mid-size companies operating on a tight budget, it might stop an option. Expenses with regard to example payroll and gas add up in the time between payment, and not paying your drivers is never a good business rehearsal. Add to that rising fuel costs, delays due to traffic congestion, driver shortages and new regulations, and it is a recipe for financial hardship.
Therefore, trucking companies often have to show to outside funding. The following are some choices trucking companies to consider:
Asset-Based Lending
Also known as factoring, this options refers to the process by which businesses sell their accounts receivables to a factoring company. Approval for factoring is based on the creditworthiness of the trucking company’s customers.
At the amount of the sale, the client gets 80-90% of your cash back immediately from the statements. The remainder of the balance comes after customer repayment, less a percentage fee that typically ranges from 1-5%.
This choice is best for B2B firms that cannot manage to wait for payment, and also the cost is 4-5% monthly with an effective annual rate typically between 18-30%.
Bank Loans
Though in order to find come by, bank loans are usually the cheapest type of financing. The borrowed funds process involves an application and overview of the company’s creditworthiness and financial reports. Small companies especially tend to be refused for loans, although exceptions do be around.
After approval, fund disbursement usually takes about 30-90 days attain a trucking company’s banking. This form of funding is best for trucking outfits by using a great credit ratings and don’t want the money immediately.
Cash-Advances
Cash advances take place when an organization receives an advance sum from the lender. The company pays loan provider back with percentages of that monthly card receipts prior to loan (plus a predetermined rate) is repaid. Tend to be two legal limits to the rates, and so they also cannot be changed retroactively. The advantage of cash advances is immediate cash- can be the fastest method for obtaining cash without likely to a loan shark.
This financing method very best for trucking companies who require immediate cash for any amount of time and have limited financing options. Costly is usually 20% if not more.
Lease-Back
A trucking company may choose to sell property, plant, and/or equipment, and simultaneously leases it back for resources.
It is better for trucking companies with valuable plant or equipment assets which usually underutilized, and the cost is monthly lease payments additionally, the depreciation and tax burdens of equipment.
Choices, Choices
Every trucking company is unique, make use of is almost them to discover funding solutions that meet their individual needs. Being informed on all possibilities is customers step toward finding a suitable cash flow solution.
4 Global Corp
12963 W Okeechobee Rd suite 4, Hialeah Gardens, FL 33018
(305) 912-9444